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Financial Planning > Charitable Giving

Philanthropy Focus: What You and Your Clients Should Do

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Advisors wanting to move into assisting clients with their charitable giving may be wondering just how deeply they should involve themselves in the process. At what point might they feel uncomfortable, or realize they are in over their heads? At what point should they hand off the process to experts in philanthropic consulting?

In this two-part series on philanthropy, we will look at both sides of the coin–what advisors can and should do, and what they should not do or should consider turning over to a philanthropic consultant.

Calvin Edwards and his eponymous philanthropic consulting firm recently presented a webinar through Advisors in Philanthropy that addressed just these points. Advisors who want to provide their donor clients with guidance on their philanthropic goals will find that there are a number of areas to which their expertise is particularly suited, while other aspects of giving will depend on their willingness to involve themselves more deeply or are perhaps best handed off to experts in other areas.

While offering what he says is an oversimplified analysis of the areas in which financial advisors and philanthropic advisors differ, Edwards says that the field of philanthropic consulting is an emerging one. The two advisors’ roles can be roughly broken down as follows: on a donation check to a charity, the financial advisor, he explains, is basically responsible for the dollar amount on the check—growing the assets that provide the funding and preparing the financial plan that allows the gifting.

The philanthropic consultant is responsible for the payee on the check: choosing the organization best able to carry out the donor’s philanthropic goals, and making sure that that organization understands the donor’s wishes and is prepared to execute them in an effective and fiscally sound manner.

There is much more to it than that, of course, he adds. However, sometimes the lines between the two can blur, depending on how much involvement an advisor wants or is qualified for, and how willing a client is to consult with a philanthropic expert.

Here are the main things Edwards says that an advisor can and should do in the philanthropic planning process.

Have conversations that relate to clients’ deeply held values, beliefs and priorities. Advisors who ask their clients what is really important to them will find that they express it in a number of different ways–referring to passions, interests, callings, or purpose in life. These are key to discovering what is most important to your client in his philanthropic efforts, and often the most important objectives are spurred by life experience–such as contributing to cancer research after losing a family member to the disease, or, as in the case of a client Edwards had, focusing on improving foster families in his home state. The client had been a foster child himself and knew what needed to be improved in the system. Personal experience is often the driving force.

Provide the financial planning that will enable your client to carry out his philanthropic goals. This includes traditional financial analysis and a comprehensive financial plan.

Calculate your client’s giving capacity. How much can he give now? In the future? Will he be coming into any bequests that can change his plans, or is the sale of a business pending that will affect his gifting?

Find ways to increase your client’s giving potential. Use such strategies as the sale or gifting of assets and funding of inheritance through life insurance. Depending on how committed your client is to his charitable goals, you may even want to explore an adjustment of lifestyle with him.

Use tax minimization strategies. This will free up more money and assets for charitable goals.

Establish giving vehicles. These can include donor-advised funds, private foundations and trusts.

Provide investment management for assets that are donated. This can offer your client a broader opportunity for donation, and will also solidify your relationship as you advance his objectives over the long term.

Part 2 of this series looks at what advisors should not, or may not want to, do for their clients’ philanthropic needs.


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